Finance Ministry to come out with clarifications on FBT soon

Despite the hiccups including ground level problems at the level of the bank branches, corporates are taking the FBT on their stride and looking to comply with the provisions.

Our Bureau

New Delhi, July 14

THE Finance Ministry would issue a circular clarifying the provisions of law on the Fringe Benefit Tax (FBT) before the end of next week, a top Central Board of Direct Taxes (CBDT) official has said.

Industry in particular and tax professionals are eagerly awaiting this circular for getting more clarity and a thorough understanding of the provisions relating to FBT, which was introduced in this year's Union Budget.

When asked whether there was any intent on part of the Revenue Department to extend the due date i.e. July 15 for the first instalment of advance payment of FBT, the senior CBDT official however replied in the negative.

Industry has a number of issues on FBT that it feels are hazy and hence need to be settled.

For example, consumer durable manufacturers are caught in a bind as to whether the discounts given to customers would attract FBT or not. In most cases, the discounts are treated as sales promotion expenditure.

But despite the hiccups including ground level problems at the level of the bank branches, corporates are taking the FBT on their stride and looking to comply with the provisions.

"It is still not clear whether FBT should be levied on employee related expenses alone or total expenditure.

"What would be the treatment if a partner (of a firm) travels from Delhi to Mumbai on work? There is also no clarity on the tax treatment if the employer recovers a part of the amount spent from the employee. You will have FBT in this case or not is not clear," Mr Ved Jain, Chairman of the Assocham Direct Taxes Committee, told Business Line.

He also highlighted that expenditure such as medical treatment of employees could be considered as a perquisite as well as a fringe benefit and there has to be more clarity on this issue. "Banks are not accepting the tax since they do not know under which account head they should collect it. There have been no instructions to the branches from their head offices," Mr Jain said.

According to a direct tax expert with FICCI, FBT is now a law but the chamber is in talks with the Finance Ministry for making concessions on the number of allowances to be taxed under the FBT.

"But such concessions can only come in the future.

"As of now the Finance Ministry has come out with a new form for the corporates to file the tax. The form is already available and corporates can file the tax by tomorrow," the expert said.

(This article was published in the Business Line print edition dated July 15, 2005)

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